PPL ELECTRIC UTILITIES CORPORATION
DEFAULT SERVICE SPOT MARKET
SUPPLY MASTER AGREEMENT
BETWEEN
PPL ELECTRIC UTILITIES CORPORATION
AND
[SELLER NAME]
DATED ______
DEFAULT SERVICE SPOT MARKET SUPPLY MASTER AGREEMENT
Articles and Provisions
Table of Contents
ARTICLE 1 DEFINITIONS 5
ARTICLE 2 TERMS AND CONDITIONS OF HOURLY FULL REQUIREMENTS SERVICE 14
2.1 Seller’s Obligation To Provide Service 14
2.2 Buyer’s Obligation to Take Service 14
2.3 Network Integration Transmission Service and Distribution Service 14
2.4 Other Changes in PJM Charges 15
2.5 Status of Seller 15
2.6 Sales for Resale 15
2.7 Governing Terms 15
2.8 Transaction Confirmation 15
ARTICLE 3 SCHEDULING, FORECASTING, AND INFORMATION SHARING 16
3.1 Scheduling 16
3.2 Load Forecasting 16
3.3 Information Sharing 16
ARTICLE 4 SPECIAL TERMS AND CONDITIONS 16
4.1 Congestion and Congestion Management 16
4.2 Load Response Programs 16
4.3 PJM E-Accounts 16
4.4 Alternative Energy Portfolio Standards Obligation 16
4.5 Title Transfer 17
4.6 Reliability Guidelines 18
4.7 PJM Membership 18
4.8 Declaration of Authority 18
4.9 FERC Authorization 18
4.10 Disclosure in the Event of Seller Default 18
4.11 Seller Step-Up Rights 18
ARTICLE 5 TERM AND SURVIVAL 19
5.1 Term 19
5.2 Survival 19
ARTICLE 6 DETERMINATION OF DELIVERED QUANTITIES 19
6.1 Monthly Settlement Load 19
6.2 Monthly Settlement Capacity Obligation 20
ARTICLE 7 BILLING AND SETTLEMENT 20
7.1 Billing 20
7.2 PJM Billing 20
7.3 Payments of the Invoice 21
7.4 Billing Disputes and Adjustments of Invoices 21
7.5 Interest on Unpaid Balances 21
7.6 Netting of Payments 21
ARTICLE 8 TAXES 21
8.1 Cooperation 22
8.2 Taxes 22
8.3 Disclosure of Tax Treatment 22
ARTICLE 9 INDEMNIFICATION 22
9.1 Seller’s Indemnification for Third-Party Claims 22
9.2 Buyer’s Indemnification for Third-Party Claims 23
9.3 Indemnification Procedures 23
ARTICLE 10 LIMITATIONS OF REMEDIES, LIABILITY AND DAMAGES 23
ARTICLE 11 FORCE MAJEURE 24
11.1 Force Majeure 24
11.2 Notification 24
ARTICLE 12 EVENTS OF DEFAULT; REMEDIES 25
12.1 Events of Default 25
12.2 Remedies 26
12.3 Calculation and Net Out of Settlement Amounts 27
12.4 Notice of Termination Payment 28
12.5 Disputes With Respect to Termination Payment 28
12.6 Duty to Mitigate 28
ARTICLE 13 DISPUTE RESOLUTION 28
13.1 Informal Dispute Resolution 28
13.2 Formal Dispute Resolution 29
ARTICLE 14 PERFORMANCE ASSURANCE 29
14.1 Requirement for Performance Assurance 29
14.2 Performance Assurance Transfers/Returns 29
14.3 Unsecured Credit 30
14.4 Credit Rating 31
14.5 Tangible Net Worth 31
14.6 Credit Exposure/Aggregate Buyer’s Exposure 31
ARTICLE 15 REPRESENTATIONS AND WARRANTIES 32
15.1 Representations and Warranties 32
15.2 Additional Understandings 33
ARTICLE 16 MISCELLANEOUS 34
16.1 Notices 34
16.2 General 34
16.3 Rules of Interpretation 34
16.5 Confidentiality 35
16.6 Successors 36
16.7 Assignment/Change in Corporate Identity 36
16.8 Governing Law 36
16.9 Jurisdiction and Venue 36
16.10 Amendments 36
16.11 PJM Agreement Modifications 37
16.12 Delay and Waiver 37
16.13 Regulatory Approvals 37
EXHIBIT A TRANSACTION CONFIRMATION EXAMPLE 39
EXHIBIT B ALTERNATIVE ENERGY PORTFOLIO STANDARDS OBLIGATION 40
EXHIBIT C PERFORMANCE ASSURANCE EVERGREEN LETTER OF CREDIT 41
EXHIBIT D SAMPLE PJM INVOICE 44
EXHIBIT E UNCONDITIONAL GUARANTY 47
EXHIBIT F FORM OF NOTICE 54
EXHIBIT G PJM DECLARATION OF AUTHORITY 56
PPL Electric Utilities Corporation 4
Default Service Spot Market Supply Master Agreement
July 1, 2009
DEFAULT SERVICE SPOT MARKET SUPPLY MASTER AGREEMENT
THIS DEFAULT SERVICE SPOT MARKET SUPPLY MASTER AGREEMENT (“Agreement” or “DSSM SMA”), is made and entered into as of ______(“Effective Date”), by and between , hereinafter referred to as “Seller” and PPL Electric Utilities Corporation, hereinafter referred to as “Buyer” (each hereinafter referred to individually as “Party” and collectively as “Parties”).
WITNESSETH:
WHEREAS, the Pennsylvania Public Utility Commission Orders issued pursuant to the Electricity Generation Customer Choice and Competition Act, 66 Pa. C. S. Sections 2801-2812, as amended under Act 129 of 2008, direct Buyer to supply electric service to Provider of Last Resort or Default Service (“Default Service”) within Buyer's Pennsylvania franchise service territory; and
WHEREAS, the Pennsylvania legislature has enacted a law establishing an Alternative Energy Portfolio Standard applicable to retail electricity suppliers serving customers in the Commonwealth of Pennsylvania; and
WHEREAS, Buyer has solicited offers for obtaining an Hourly Full Requirements product to fulfill a portion of the supply it requires to meet its Default Service obligation pursuant to a Request for Proposal (“RFP”) and the Seller is a winning bidder in that solicitation; and
WHEREAS, Seller desires to sell an Hourly Full Requirements Service and Buyer desires to purchase such Hourly Full Requirements Service to supply a Specified Percentage in Buyer’s Pennsylvania franchised service territory on a firm and continuous basis; and
NOW, THEREFORE, and in consideration of the foregoing, and of the mutual promises, covenants, and conditions set forth herein, and other good and valuable consideration, the Parties hereto, intending to be legally bound by the terms and conditions set forth in this Agreement, hereby agree as follows:
ARTICLE 1 DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following definitions shall apply hereunder:
“Affiliate” means, with respect to any entity, any other entity that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity. For this purpose, “control” means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power.
“Aggregate Buyer’s Exposure” means all Buyer’s Exposure for Aggregate Transactions.
“Aggregate Transactions” means all Transactions under this Agreement and all other transactions for Default Service under Supply Master Agreements executed between the Parties pursuant to the PUC Orders, including but not limited to agreements under the Competitive Bridge Plan.
“Agreement” means this Default SMA.
“Alternative Energy Credit (“AEC”)” means a tradable instrument that is used to establish, verify, and monitor compliance with the AEPS Obligation. One AEC equals one megawatt hour of electricity from an alternative energy source.
“Alternative Energy Portfolio Standards (“AEPS”) Obligation” shall have the meaning ascribed to it in Section 4.4 (Alternative Energy Portfolio Standards Obligation).
“Alternative Energy Portfolio Standards (“AEPS”)” shall have the meaning ascribed to it in the Pennsylvania Alternative Energy Portfolio Standards Act, 73 P.S. §§ 1648.1-1648.8, as amended from time to time..
“Ancillary Services” shall have the meaning ascribed thereto in the PJM Agreements.
“Bankrupt” means, with respect to any entity, such entity: (i) voluntarily files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it by its creditors and such petition is not dismissed within sixty (60) calendar days of the filing or commencement; (ii) makes an assignment or any general arrangement for the benefit of creditors; (iii) otherwise becomes insolvent, however evidenced; (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets; or (v) is generally unable to pay its debts as they fall due.
“Block Supply” means 300 MW of around-the-clock Energy, Capacity, Transmission other than Network Integration Service, and associated AECs, delivered to the PPL zone. The entirety of this Block Supply will be allocated to the Residential Customer Group.
“Business Day” means any day except a Saturday, Sunday or a day that PJM declares to be a holiday, as posted on the PJM website. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. Eastern Prevailing Time (“EPT”).
“Buyer Downgrade Event ” means that Buyer’s (or Buyer’s Guarantor’s) Credit Rating is less than BBB- by S&P, BBB- by Fitch or Baa3 by Moody’s.
“Buyer’s Exposure” during the term of a Transaction shall be deemed equal to an amount designated as the Credit Exposure under this Agreement.
“Capacity” means “Unforced Capacity” as set forth in the PJM Agreements, or any successor measurement of the Capacity Obligation of a Load Serving Entity as may be employed in PJM (whether set forth in the PJM Agreements or elsewhere).
“Capacity Obligation” means the product of the Current PLC Per Tranche, adjusted as appropriate to account for the reserve margin and scaling factors, consistent with PJM unforced capacity accounting, and the number of Tranches awarded to the Seller for Default Service Spot Market Load.
“Congestion Revenue Rights” or “CRR” means the current or any successor congestion management mechanism or mechanisms as may be employed by PJM (whether set forth in the PJM Tariff or elsewhere) for the purpose of allocating financial congestion hedges.
“Costs” means, with respect to the Non-Defaulting Party, brokerage fees, commissions, PJM charges, and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating any arrangement pursuant to which it has hedged its Default Service Spot Market Load obligations or entering into new arrangements which replace a Terminated Transaction; and all reasonable attorneys’ fees and expenses incurred by the Non-Defaulting Party in connection with the termination of a Transaction or any other default pursuant to this Agreement, or pursuant to transactions for Default Load under Supply Master Agreements executed between the Parties pursuant to the PUC Orders, including but not limited to the AEPS obligation.
“Credit Rating” means, with respect to any entity, the rating then assigned to such entity’s unsecured, senior long-term debt obligations (not supported by third party credit enhancements) or if such entity does not have a rating for its senior unsecured long-term debt, then the rating then assigned to such entity as an issuer rating by S&P, Moody’s or Fitch.
“Current PLC Per Tranche” means, on any given Business Day, for each Transaction, the product of: (i) the aggregate PLC associated with a Customer Group; and (ii) the quotient of (x) the Specified Percentage and (y) the number of Tranches.
“Customer Group” means a customer category for the Default Load, consisting of all customers classes in the Service Type as specified in a Transaction Confirmation
“Declaration of Authority” shall have the meaning ascribed to it in Section 4.8 (Declaration of Authority).
“Default Damages” means, for the period of time specified in Section 12.2(b)(ii) (Remedies) any direct damages and Costs, calculated in a commercially reasonable manner, that the Non-Defaulting Party incurs with respect to the Specified Percentage as a result of an Event of Default. Direct damages may include, but are not limited to: (i) the positive difference (if any) between the price of Hourly Full Requirements Service hereunder and the price at which the Buyer or Seller is able to purchase or sell (as applicable) Hourly Full Requirements Service (or any components of Hourly Full Requirements Service it is able to purchase or sell) from or to third parties, including PJM; (ii) Emergency Energy charges; and (iii) additional transmission or congestion costs incurred to purchase or sell Hourly Full Requirements Service.
PPL Electric Utilities Corporation 5
Default Service Spot Market Supply Master Agreement
July 1, 2009
“Default Service Load” or “Default Load” means the total sales at the retail meter, plus any transmission and distribution losses and Unaccounted For Energy, adjusted for PJM's derating in conjunction with marginal loss implementation as appropriate, expressed in MWh or MW, as appropriate, for a particular class(es) of retail customers being served by Buyer pursuant to the PUC Orders, as such sales vary from hour to hour, in Buyer’s Pennsylvania franchise service territory, as such territory exists on the Effective Date or may increase or decrease due to de minimis geographic border changes to the service territory that exists on the Effective Date, less Block Supply and Unit Entitlement Supply and as defined by PUC Order dated June 16, 2010, Optional Monthly Pricing Service (OPMS) Supply. For purposes of clarification, Default Load shall not include sales resulting from changes in the Buyer’s Pennsylvania service territory which occur as a result of a merger, consolidation, or acquisition of another entity which has a franchised service territory in Pennsylvania or a result of a significant franchise territory swap with another entity which has a franchised service territory in Pennsylvania.
“Default Service Fixed Price Load” or “Default Fixed Price Load” means the Tranches of Default Load served by entities that have been selected through a PPL Electric solicitation to serve Default Service Load of PPL Electric retail customers at a fixed price.
“Default Service Spot Market Load” or “Default Spot Market Load” means the product of the Specified Percentage and the Default Load.
“Default Service Fixed Price Supplier” means an entity that has been selected through a PPL Electric solicitation to serve the Default Service Fixed Price Load of PPL Electric retail customers.
“Default Service Spot Market Supplier” means an entity that has been selected through a PPL Electric solicitation to serve the Default Service Spot Market Load of PPL Electric retail customers.
“Default Service Spot Market Supplier Price” means the price per MWh as set forth in a Transaction Confirmation for Default Service Spot Market Load.
“Delivery Period” means the period of delivery for a Transaction as specified in a Transaction Confirmation.
“Delivery Point” means the PPL Electric Utilities Transmission Zone as defined by the PJM Agreements.
“Eastern Prevailing Time” or “EPT” means Eastern Standard Time or Eastern Daylight Savings Time, whichever is in effect on any particular date.
“Emergency Energy” shall have the meaning ascribed to it in the PJM Agreements.
PPL Electric Utilities Corporation 8
Default Service Spot Market Supply Master Agreement
Updated September 7, 2010
“Energy” means three-phase, 60-cycle alternating current electric energy, expressed in units of megawatt-hours.
“Equitable Defenses” means any bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending.
“FERC” means the Federal Energy Regulatory Commission or its successor.
“Fitch” means Fitch Investor Service, Inc. or its successor.
“Force Majeure” “Force Majeure” means an event or circumstance which prevents one party from performing its obligations under one or more transactions, such as riot or revolutions, demands or embargoes of the United States Government, fire, flood, drought, insurrection, acts of God which are not within the reasonable control of, or the result of the negligence of the affected party and which, by the exercise of due diligence, the Party is unable to mitigate or avoid or cause to be avoided. Notwithstanding the foregoing, under no circumstance shall an event of Force Majeure be based on: (i) the loss or failure of Seller’s supply; (ii) Seller’s ability to sell the Hourly Full Requirements Service at a price greater than that received under any Transaction; (iii) curtailment by a Transmitting Utility; (iv) Buyer’s ability to purchase the Hourly Full Requirements Service at a price lower than paid under any Transaction; or (v) Labor stoppage or lockout.